Supermarket Sainsbury's has warned the market is growing at its slowest pace for nearly a decade as it broke a nine-year run of underlying sales growth.
The group revealed that like-for-like sales excluding fuel slumped 3.1% in the 10 weeks to March 15, marking a sharp reversal of recent fortunes and the first fall after 36 consecutive quarters of rising sales in a row.
Outgoing boss Justin King said the group came up against tough comparatives from a year earlier when it outperformed many rivals amid the horsemeat scandal and benefited from the timing of Mother's Day and Easter trade.
But he stressed that the market was facing tough conditions in the latest downbeat trading statement from one of the "big four" players as cost-conscious consumers increasingly turn to discounters such as Aldi and Lidl.
He said: "The market is now growing at its slowest rate since 2005, with falling food inflation in particular benefiting customers."
He added: "Although some economic indicators are showing an improvement in the health of the economy, we expect the outlook for customers to continue to be challenging for the coming year."
Sainsbury's has announced like-for-like sales are down 3.8% (down 3.1% excluding fuel) for the fourth quarter. Total sales for the same quarter were down 1.5% (down 1% excluding fuel).
The outgoing Chief Executive of Sainsbury's, Justin King, has warned an independent Scotland could face much higher food costs.
Speaking in the Financial Times (£) he said:
“Once it is a separate country, we and other retailers will take a view of what the cost structure is of that industry, and of course the revenue structure too. If you were to strike that today, there is no doubt Scotland is a more costly country [in which] to run a grocery retail business.”
In the same article John Fingleton, former chair of the Irish Competition Authority and chief executive of the UK’s Office of Fair Trading said:
“Scotland is very sparsely populated and retailers carry that extra distribution cost out of the centre.
"If those costs are isolated to Scotland only, it will just push up the prices in Scotland and lower prices in England. All of the retail sectors where in-time distribution matters [will be looking at this].”
Justin King is one of the most respected retail figures in the UK, yet I suspect that many of the 18.5 million shoppers that use the stores have no idea who he is.
Unlike brands such as Virgin and Ryanair, the boss has not been used in television advertising. Yet the ultimate manager is vital - Sainsbury's says it's aim is to be the most trusted supermarket.
Trust takes constancy of leadership and direction - chopping and changing is soon seen in the sales isles. Mr King's last job at Sainsbury's will be one of his most important - creating a smooth handover.
Sainsbury's chief executive Justin King is to step down in July, the supermarket announced today.
Speculation surrounding Mr King's departure suggests he is set to take over from Bernie Eccleston as the next boss of Formula One.
Sainsbury's chief executive Justin King has told ITV News that the chain's popular toys range is "new competition" for businesses like Mothercare, whose shares fell 30% today.
Sainsbury's enjoyed its busiest trading week ever in the run-up to Christmas, helping like-for-like sales in its latest quarter climb by 0.2%.
Chief executive Justin King said the 14 weeks to January 4 had been a "very tough sales environment" but the supermarket managed to maintain its record of growth - after it was forecast to fall after 35 successive periods of expansion.
Mr King said the seven days prior to Christmas was the group's busiest ever trading week, with more than 28 million transactions.
The CEO of Sainsbury's has warned that while the British economy may be seeing positive signs of recovery, individual consumers are still finding their purchasing power reduced.
"I think what we're seeing is lots of good signs of recovery for the economy," Justin King told ITV News, "whether it be lower inflation or job creation and so on."
"But as far as individuals are concerned, they're seeing low pay rises, they're still seeing inflation - it came down yesterday but it was still 2.2% - and so on average they've got less money to spend.
"So whilst it's good news to feel that you're living and working in a country where things are getting better, in the end it's what happens to you as an individual that's going to make a difference to your shopping habits."